Anheuser-Busch’s continued pursuit

In the past few months there has been a tremendous amount of mergers and acquisitions activity across several sectors. The beer industry has been no exception. Over the past few week Anheuser-Busch has made several attempts to take over one of the largest beer companies in the world, SABMiller, in order to increase scale. Last week Anheuser-Busch made a miscalculation and made a public offer for the company that only hurt its chances of making the acquisition possible. Anheuser-Busch misjudged the situation and thought that it had a few key shareholders’ support, when in fact it did not. How much exactly did this misstep cost the company? The offer went from $99.2 Billion dollars to $103.3 Billion dollars, a $4.1 Billion dollar increase. The new offer is a 48% premium to what the SABMiller’s closing price was on the day prior to the first offer being made public. Measured by revenues, SABMiller is the second largest brewer in the world. The South American beverage company headquartered in London and is famous for its Pilsner Urquell, Miller, and Peroni. The latest offer made would price the London-based company’s stock at $66.59 a share. It is believed that one factor in Anheuser-Busch’s decision to increase its offer is the fact that under British takeover laws, should SABMiller not accept this offer, Anheuser Busch may not be able to make another formal bid for the company for up to six months. Another twist in the deal is that the two largest shareholders of SABMiller, Altria and the Santo Domingo’s BevCo, must take a discounted price per share, however, they will also receive some equity in the newly created entity. In the booming takeover market that we are now experiencing, equity investors must be mindful to rely on fundamental analysis to ensure that quickly rising $100 Billion dollar offers are not inflated. But in short, this acquisition has certainly not been a smooth process for Anheuser-Busch.